It was risk on through the Asian session, with equity markets rallying, a jump in commodity prices supporting the Aussie Dollar that managed to shake off weak stats early on, with retail sales the next hurdle for the Pound this morning.
Earlier in the Day:
Economic data released during the Asian session this morning included inflation figures out of New Zealand and employment numbers out of Australia.
For the Kiwi Dollar, the annual rate of inflation eased from a 4th quarter 1.6% to 1.1% year-on-year, in the 1stquarter, which was in line with forecasts, whilst quarter-on-quarter, inflation accelerated from 0.1% to 0.5%, which was better than a forecasted 0.4%.
Statistics New Zealand reported that government influenced price changes impacted the annual rate of inflation, with higher cigarette and tobacco prices being offset by cheaper tertiary education, which fell by 16% in the March 2018 quarter.
Tobacco taxes increased on 1st January 2018, with prices rising by 10%, with increased prices for accommodation services and petrol also contributing to the quarterly rise, though partially offset by seasonal falls for international airfares.
For the March 2018 year, housing and household utility prices increased by 3.1%, with construction prices rising by 4.7% in the year and by 0.4% in the quarter, while housing rentals increased by 2.1% in the year.
The Kiwi Dollar moved from $0.73284 to $0.73348 upon release of the figures before easing back to $0.7323 at the time of writing, up 0.05% for the session.
For the Aussie Dollar, the March employment figures were somewhat disappointing, while the NAB’s Quarterly Business Confidence Index was unchanged.
In March, full employment fell by 19,900 according to the ABS, reversing most of the downwardly revised 20,100 increase in February, while employment increased by 4,900, following February’s revised 6,300 fall, the number coming in well below a forecasted 20,300 increase.
The 4,900 increase came from a 24,800 increase in part-time employment, offsetting the 19,900 fall in full-time employment, while the employment to population ratio fell by 0.1% to 61.9%, with the participation rate also falling by 0.1% to 65.5%.
The unemployment rate stood at 5.5%, unchanged from February’s revised rate and in line with forecasts.
The NAB Business Confidence Index held steady at +7 points, holding just above the historical average, while the business conditions index increased by 2 points to +17 points in the 1st quarter, its highest level since 2007.
The Aussie Dollar moved from $0.77931 to $0.77733 upon release of the figures before rallying to $0.7806 at the time of writing, up 0.0.28% for the session, fuelled by a jump in commodity prices.
For the Japanese Yen, easing geo-political risk and a pickup in risk appetite eased demand for the Yen, which was down 0.19% to ¥107.43 at the time of writing, with the equity markets enjoying a solid session, the ASX200 and Nikkei up 0.47% and 0.41% respectively ahead of the close. The CSI300 and Hang Seng also enjoyed a continued recovery, up 1.31% and 1.28% at the time of writing.
The Day Ahead:
For the EUR, it’s a quiet day on the economic data front, following softer March headline inflation numbers on Tuesday, with the EUR expected to be on the back foot in the coming days ahead of next week’s ECB monetary policy decision and press conference, where recently softer economic indicators and the lack of a build-up in inflationary pressure will support Draghi’s recently dovish stance that will likely continue.
Dollar weakness is the EUR’s only chance of holding at $1.23 levels, with the EUR up 0.03% to $1.2378 at the time of writing.
For the Pound, following the disappointment in the inflation figures that saw the Pound pull back to $1.41 levels, it’s the UK’s March retail sales figures, due out later this morning, to provide further direction.
With the inflation figures softer, retail sales figures are also forecasted to be a negative, though with inflation continuing to overshoot the BoE’s 2% target, there may be some question marks over whether the BoE would actually pause, inflationary pressures being considered the cause of the softer domestic consumption numbers and the reason for some of the MPC hawks looking to make a move on rates.
At the time of writing, the Pound was down 0.03% to $1.4199, with today’s stats the key driver, though the markets will also need to listen out for any news from Brussels on Brexit negotiations.
Across the Pond, stats for the day include the weekly jobless claims figures together with April’s Philly FED Manufacturing Index numbers that will provide some direction for the Dollar that found some strength following the release of the Beige Book on Wednesday.
While the stats will play a hand in the direction of the Dollar, any weakness in the manufacturing numbers and softer jobless claims figures likely to raise more concern over the soft patch in the economy, noise from the Oval Office will also be a factor to continue to consider, Trump likely to trump any stats on the day.
The Dollar Spot Index was up 0.02% to 89.636, easing back from a morning high 89.727.
Across the border, following the slide in the Loonie on Wednesday in response to the BoC policy report and rate statement, ADP nonfarm employment change figures due out this afternoon will provide further direction, though any major upside will likely be limited should the numbers impress.
At the time of writing, the Loonie was up 0.06% to C$1.2622, partially recovering some of Wednesday’s losses.